GTT Communications, Inc. (“GTT”("GTT" or the "Company") is a providerserves large enterprise and carrier clients with complex national and global networking needs, and differentiates itself from the competition by providing an outstanding service experience built on its core values of cloud networking services to multinational clients.simplicity, speed and agility. The Company offersoperates a broad portfolio of global services including: private networking services, Internet services, optical transport, managed networking and security services, voice and unified communication services, and video transport services.

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and should be read in conjunction with the Company’s audited financial statements and footnotes thereto for the fiscal year ended December 31, 2016,2018, included in the Company’s Annual Report on Form 10-K filed on March 8, 2017.1, 2019. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been omitted pursuant to such rules and regulations.

The condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s consolidated financial position and its results of operations. The operating results for the three and ninesix months ended SeptemberJune 30, 20172019 are not necessarily indicative of the results to be expected for the full fiscal year 20172019 or for any other interim period. The December 31, 20162018 consolidated balance sheet is condensed from the audited financial statements as of that date, but does not include all disclosures required by GAAP.date.

As a result of policy alignments related to acquired businesses, certainCertain prior period amounts in the condensed consolidated statementsstatement of cash flows have been reclassified to conform with the current period presentation to better reflect the nature of these activities. The Company has reclassified $5.0 million from the "Deferred revenue and other liabilities" line to the "Non-cash deferred revenue" line and $2.0 million from the "Deferred costs and other assets" line to the "Non-cash deferred costs" line for the nine months ended September 30, 2016. These reclassifications had no impact on the nettotal change in cashdeferred revenue into a single line item as well as changes in operating assets and cash equivalents or cash flows from operating, investing and financing activities for any periods presented.liabilities to more closely align with the related condensed consolidated balance sheet caption.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates are used when establishing allowances for doubtful accounts, and accruals for billing disputes and exit activities, determining useful lives for depreciation and amortization, and accruals for exit activities, assessing the need for impairment charges (including those related to intangible assets and goodwill), determining the fair values of assets acquired and liabilities assumed in business combinations, assessing the fair value of derivative financial instruments, accounting for income taxes and related valuation allowances against deferred tax assets, and estimating the grant date fair values used to compute the share-based compensation expense. Management evaluates these estimates and judgments on an ongoing basis and makes estimates based on historical experience, current conditions, and various other assumptions that are believed to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Actual results may differ from these estimates under different assumptions or conditions.

The Company reports operating results and financial data in one operating and reporting segment. The Company's Chief Executive Officer is the chief operating decision maker and manages the Company as a single profit center in order to promote collaboration, provide comprehensive service offerings across its entire customer base, and provide incentives to employees based on the success

allocates resources at the consolidated level. Additionally, integration efforts related to Interoute Communications Holdings, S.A. ("Interoute") are nearing completion, but have not currently changed the manner in which the chief operating decision maker has managed the consolidated business. These integration efforts are designed to establish scale and align Interoute's network assets and product offerings within the existing business.

The Company delivers six primaryCompany's revenue is derived primarily from telecommunications services, which includes both revenue from contracts with customers and lease revenues. Lease revenue services include dark fiber, duct, and colocation services. All other services are considered revenue from contracts with customers. Revenue from contracts with customers is recognized when services are provided to its customers — optical transport, WAN connectivity services, high bandwidth Internet connectivity services, managed network and security services, global communication and collaboration services, and video transport services. Certain of its current commercial activities have featuresthe customer, in an amount that may be considered multiple elements, specifically whenreflects the consideration the Company sells its connectivity servicesexpects to receive in additionexchange for those services. Lease revenue represents an arrangement where the customer has the right to customer premise equipment ("CPE"). The Company believes that there is sufficient evidence to determine each element’s fair valueuse an identified asset for a specified term and as a result, in those arrangements where there are multiple elements, the servicesuch revenue is recorded ratablyrecognized over the term the customer is given exclusive access to the asset.

The Company's comprehensive portfolio of the agreementcloud networking services includes: wide area networking; internet services; transport & infrastructure services; voice services; and the equipment is accounted for as a sale, at the time of sale as long as collectability is reasonably assured.other managed services.

The Company's services are provided under contracts that typically include an installation or provisioning charge along with payments of recurring charges on a monthly basis for use of the services over a committed term. ItsThe Company's contracts with customers specify the terms and conditions for providing such services, including installation date, recurring and non-recurring fees, payment terms, and length of term. These contracts call for the Company to provide the service in question (e.g., data transmission between point A and point Z), to manage the activation process, and to provide ongoing support (in the form of service maintenance and trouble-shooting) during the service term. The contracts do not typically provide the customer any rights to use specifically identifiable assets. Furthermore, the contracts generally provide the Company with discretion to engineer (or re-engineer) a particular network solution to satisfy each customer’s data transmission requirement, and typically prohibit physical access by the customer to the network infrastructure used by the Company and its suppliers to deliver the services.

Contract liabilities are generally limited to deferred revenue. Deferred revenue is a contract liability, representing advance consideration received from customers primarily related to the pre-paid capacity sales noted above, where transfer of control occurs over time, and therefore revenue is recognized over the related contractual service period. The Company's contract liabilities were $71.8 million and $75.7 million as of June 30, 2019 and December 31, 2018, respectively. The change in contract liabilities during the six months ended June 30, 2019 included $14.7 million for revenue recognized that was included in the contract liability balance as of January 1, 2019 and $11.2 million for new contract liabilities net of amounts recognized as revenue during the period.

Cost of telecommunications services includes direct costs incurred in accessing other telecommunications providers’ networks in order to maintain the Company's global Tier 1 IP network and provide telecommunication services to the Company's customers, including access, co-location, usage-based charges, and usage-based charges.certain excise taxes and surcharges recorded on a gross basis.

The Company issues three types of equity grants under its share-based compensation plan: time-based restricted stock, time-based stock options, and performance-based restricted stock. The time-based restricted stock and stock options generally vest over a four-yearfour year period, contingent upon meeting the requisite service period requirement. Performance awards typically vest over a shorter period, e.g. one to two years, starting when the performance criteria established in the grant have been met.

The share price of the Company's common stock as reported on the NYSE MKTNew York Stock Exchange ("NYSE") on the date of grant is used as the fair value for all restricted stock. The Company uses the Black-Scholes option-pricing model to determine the estimated fair value for stock options. Critical inputs into the Black-Scholes option-pricing model include the following: option exercise price;price, fair value of the stock;stock price, expected life of the option;option, annualized volatility of the stock;stock, annual rate of quarterly dividends on the stock;stock, and risk-free interest rate.

Implied volatility is calculated as of each grant date based on our historical stock price volatility along with an assessment of a peer group. Other than the expected life of the option, volatility is the most sensitive input to our option grants. The risk-free interest rate used in the Black-Scholes option-pricing model is determined by referencing the U.S. Treasury yield curve rates with the remaining term equal to the expected life assumed at the date of grant. Forfeitures are estimated based on our historical analysis of attrition levels. Forfeiture estimates are updated quarterly for actual forfeitures.

The share-based compensation expense for time-based restricted stock and stock options is recognized on a straight-line basis over the vesting period. The Company recognizesbegins recognizing share-based compensation expense for performance awards when the Company considers the achievement of the performance criteria to be probable.probable through the expected vesting period.

Income taxes are accounted for under the asset and liability method pursuant to GAAP. Under this method, deferred tax assets and liabilities are recognized for the expected future consequencesimpacts attributable to the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period of the change. Further, deferred tax assets are recognized for the expected realization of available net operating loss and tax credit carryforwards. A valuation allowance is recorded on gross deferred tax assets when it is “more"more likely than not”not" that such asset will not be realized. When evaluating the realizability of deferred tax assets, all evidence, both positive and negative, is evaluated. Items considered in this analysis include the ability to carry back losses, the reversal of temporary differences, tax planning strategies, and expectations of future earnings. The Company reviews its deferred tax assets on a quarterly basis to determine if a valuation allowance is required based upon these factors. Changes in the Company's assessment of the need for a valuation allowance could give rise to a change in such allowance, potentially resulting in additional expense or benefit in the period of change.

The Company's income tax provision includes U.S. federal, state, local, and foreign income taxes and is based on pre-tax income or loss. In determining the annual effective income tax rate, the Company analyzes various factors, including its annual earnings and taxing jurisdictions in which the earnings were generated, transfer pricing methods, the impact of state and local income taxes, and its ability to use tax credits and net operating loss carryforwards.

Under GAAP, for income taxes, the amount of tax benefit to be recognized is the amount of benefit that is “more"more likely than not”not" to be sustained upon examination. The Company analyzes its tax filing positions in all of the U.S. federal, state, local, and foreign tax jurisdictions where it is required to file income tax returns, as well as for all open tax years in these jurisdictions. If, based on this analysis, the Company determines that uncertainties in tax positions exist, a liability is established in the consolidated financial statements. The Company recognizes accrued interest and penalties related to unrecognized tax positions in the provision for income taxes.

In addition to net (loss) income,loss, comprehensive (loss) incomeloss includes certain charges or credits to equity occurring other than as a result of transactions with stockholders. For the Company, this consists of foreign currency translation adjustments.

Basic (loss) earningsloss per share is computed by dividing net (loss) incomeloss available to common stockholders by the weighted average number of common shares outstanding. Diluted (loss) earningsloss per share reflect,reflects, in periods with earnings and in which they haveit has a dilutive effect, the effect of common shares issuable upon exercise of stock options.options and warrants.

The table below details the calculations of (loss) earningsloss per share (in thousands,millions, except for share and per share amounts):  

All of theoutstanding stock options were anti-dilutive as of SeptemberJune 30, 20172019 and 2018 due to the net loss incurred during the period.periods. There were approximately 4,000 anti-dilutive common shares that were excluded from the computation of earnings per share446,000 and 576,000 outstanding stock options as of SeptemberJune 30, 2016. 2019 and 2018, respectively.

Cash and cash equivalents may include deposits with financial institutions as well as short-term money market instruments, certificates of deposit and debt instruments with maturities of three months or less when purchased.

The Company invests its cash and cash equivalents and short-term investments in accordance with the terms and conditions of its 2018 Credit Agreement, which seeks to ensure both liquidity and safety of principal. The Company’s policy limits investments to instruments issued by the U.S. government and commercial institutions with strong investment grade credit ratings, and places restrictions on the length of maturity. As of SeptemberJune 30, 2017,2019, the Company held no direct investments in auction rate securities, collateralized debt obligations, structured investment vehicles, or non-government guaranteed mortgage-backed securities.

Cash and cash equivalents that are contractually restricted from operating use are classified as restricted cash and cash equivalents. InThe Company had no restricted cash and cash equivalents as of June 30, 2019 or December 2016, the Company completed a private offering of $300.0 million aggregate principal amount of 7.875% senior unsecured notes due in 2024. The proceeds of the private offering plus 60 days of prepaid interest, were deposited into escrow, where the funds remained until the closing of the acquisition of Hibernia Networks ("Hibernia") that occurred in January 2017. The proceeds were released from escrow at closing to fund the Hibernia acquisition.31, 2018.

Accounts receivable balances are stated at amounts due from the customer net of an allowance for doubtful accounts. Credit extended is based on an evaluation of the customer’s financial condition and is granted to qualified customers on an unsecured basis.

The Company, pursuant to its standard service contracts, is typically entitled to impose a monthly finance charge of a certain percentage per month with respect to amounts that are past due. The Company’s standard terms require payment within 30 days of the date of the invoice. The Company treats invoices as past due when they remain unpaid, in whole or in part, beyond the payment date set forth in the applicable service contract.

The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time trade receivables are past due, the customer’s payment history and current ability to pay its obligation to the Company, and the condition of the general economy. Specific reserves are also established on a case-by-case basis by management. Credit losses have historically been within management's estimates. Actual bad debts, when determined, reduce the allowance, the adequacy of which management then reassesses. The Company writes off accounts after a determination by management that the amounts at issue are no longer likely to be collected, following the exercise of reasonable collection efforts, and upon management's determination that the costs of pursuing collection outweighsoutweigh the likelihood of recovery. The allowance for doubtful accounts was $3.8$12.1 million and $2.7$11.1 million as of SeptemberJune 30, 20172019 and December 31, 2016,2018, respectively.